Are You Ready For The UK Cryptoassets Regime As It Enters The Final Stages?

The UK is in the process of establishing a comprehensive cryptoassets regime that will bring certain cryptoassets activities within the scope of the UK regulatory perimeter. The new regime is intended to make the UK a global destination for digital assets and attract more investment, with the UK Government stating that "bringing crypto into the regulatory perimeter is a crucial step in securing the UK’s position as a world leading financial centre in the digital age".

The new regime will require firms to obtain authorisation from the Financial Conduct Authority (FCA), unless an exclusion applies, and implement policies, procedures, and controls to comply with prescriptive regulatory standards developed by the FCA.

The authorisation gateway window is expected to open in September 2026, with the new regime scheduled to apply from 25 October 2027. Whilst this may seem a long way away, the operations, IT, governance, and procedural changes required to comply with the new regime are extensive and firms should engage with the process early to avoid disruption of operations.

Activities that will be subject to regulation

Activities that will be subject to authorisation unless an exclusion applies include:

1. offering, redeeming, and maintaining the value of the qualifying stablecoin (but not creating or minting, and clarifying that stablecoin is not e-money);
2. safeguarding qualifying cryptoassets and relevant specified investment cryptoassets. There is an exclusion for qualifying cryptoassets that are held on a temporary basis and specifically for the purpose of settling trades;
3. operating a qualifying cryptoasset trading platform (a CATP). Helpfully, CATPs will be permitted to engage in matched principal trading activities provided that:
   1. both legs are executed simultaneously,
   2. the CATP does not charge a spread, but only a fee or commission, and
   3. the CATP manages settlement risk.

In addition, CATPs will be permitted to issue their own tokens and admit to trading tokens in which they arrange the issue or have a financial interest subject to careful management of conflicts  of interest. However, CATPs will not be allowed to act as a market maker, engage in principal dealing activities, extend credit to counterparties beyond credit exposure arising from settlement, or execute client orders on affiliated non-FCA authorised CATPs;

5. buying, selling for, or underwriting qualifying cryptoassets and extends to capture cryptoasset lending and borrowing services as principal or agent;
6. making arrangements for another person (whether as principal or agent) to buy, sell, subscribe for, or underwrite a qualifying cryptoasset; and making arrangements with a view to a person who participates in the arrangements buying, selling, subscribing for, or underwriting qualifying cryptoassets; and
7. making arrangements for qualifying cryptoasset staking (i.e., the use of a qualifying cryptoasset in blockchain validation) and will include liquid staking, although the issuance of liquid staking tokens will fall within the scope of the dealing activity.

It is important to note that the regime will ban the use of proprietary tokens when firms provide lending and borrowing services (e.g., collateral, loaned assets, or yield payments). Additional protections will apply to protect retail clients from significant losses due to fluctuations in the value of their collateral.

Firms will need to carefully consider whether they are undertaking any of the above referenced activities and/or whether an exclusion applies noting the introduction of certain unhelpful restrictions.

Products in scope

Each of the above-mentioned activities is only regulated to the extent that they relate to certain crypto products. These include:

• “qualifying cryptoassets” which are “cryptoassets which are fungible and transferable but excluding tokenised electronic money, central bank digital currencies and fiat currencies”;
• “specified investment cryptoassets,” which are cryptoassets that are already specified investments (e.g., a token on a blockchain that represents an interest or right to an equity, or bond, or a derivative); and
• “qualifying stablecoins” which are “qualifying cryptoassets that references fiat currencies; and seek or purport to maintain a stable value in relation to that referenced fiat currency by the issuer holding or arranging for the holding of that: (a) fiat currency; or (b) fiat currency and other assets.” This means that a cryptoasset that only references real estate assets or commodities will not be treated as a qualifying stablecoin although it could still be a qualifying cryptoasset.

Helpfully, the UK Government has confirmed that:

1. arrangements for qualifying cryptoasset staking do not amount to a collective investment scheme (CIS). This is intended to apply to assets used in the blockchain validation or DLT networks; and
2. assets used to back or stabilise a qualifying stablecoin are expressly excluded as a CIS or alternative investment fund (AIF). This will ensure that the stabilisation mechanism for stablecoins is not captured by existing UK AIF and CIS rules.

Territorial application

The regime will apply to firms conducting in-scope cryptoassets activities from a place of business in the UK, and stablecoin issuers should only fall within scope if they are physically located in the UK. However, the new regime will have extensive extraterritorial application by requiring international firms servicing retail clients to be authorised. In this regard, the FCA's baseline expectation is that international firms should operate via a UK legal entity (subsidiary), although they may be open to such firms operating through a branch on a case-by-case basis.

International firms serving only UK professional clients or acting through a UK-authorised intermediary should not be required to be authorised.

In addition, the UK Government has signaled that equivalence-style or substitutive compliance mechanisms may be deployed where overseas regimes are assessed as sufficiently comparable to avoid unnecessary market fragmentation and enable cross-border firms to continue operating without duplicative compliance burdens.

Although the details have not yet been finalised, this approach suggests that international firms subject to robust home-state regulation could rely on an equivalence determination to meet certain UK requirements.

Ongoing oversight

Firms that are authorised will be subject to ongoing supervision by the FCA and will be expected to have policies, procedures, and controls in place to ensure compliance with regulatory capital requirements, governance rules, SYSC, custody and conduct rules, reporting and market abuse.

The application of the rules will be activity-based and proportionate based on the scale and complexity of the activities undertaken.

Market abuse, admissions, and disclosures

The new regime will also require firms operating in qualifying cryptoassets space to implement comprehensive market-abuse surveillance and reporting frameworks, akin to those used in traditional securities markets.

Trading platforms and intermediaries will need to monitor for suspicious behaviour, maintain detailed audit trails, and establish clear escalation procedures for potential insider dealing, manipulation, or other abusive practices.

Firms should also expect increased regulatory scrutiny of their systems and controls, including the robustness of their data-monitoring tools, governance structures, and staff training. Ultimately, firms must be able to demonstrate that they can detect, prevent, and report market abuse effectively, ensuring the integrity of the cryptoasset markets in which they operate.

In addition, the new regime introduces strict requirements for the admission of assets to trading, and disclosure, which closely mirror the requirements that apply to traditional financial products with a view to enhancing consumer protection and market integrity.

When will the authorisation gateway open?

The FCA has confirmed that the authorisation gateway window will open on 30 September 2026 until 28 February 2027. Firms must submit their application within this window to secure FSMA authorisation ahead of the 25 October 2027 deadline. The FCA has confirmed that it will provide information sessions and pre-application support in advance of the opening of the window.

Change of control requirements

Owners and controllers of UK-authorised cryptoasset firms will be required to obtain approval from the FCA when they acquire control. We would generally expect that firms operating exclusively as cryptoasset firms would fall within the FCA’s definition of a “non-Directive firm” for FSMA change of control purposes. They would therefore be subject to notification requirements where 20% or more of the shares or voting power of the non-Directive firm, or parent undertaking of the non-Directive firm (where applicable) were acquired.

Owners and controllers will normally be approved as part of the initial authorisation process. The FCA has up to 60 working days to approve any new owners and controllers, although, in practice, such approvals are normally granted within 20-30 working days.

Next steps

Firms should begin preparing for the forthcoming regulatory framework without delay. Key actions include:

• Continue to engage actively with the FCA — either directly or through relevant industry bodies, to ensure that sector-specific issues and practical considerations are reflected in the final rules.
• Assess whether current or planned activities fall within the scope of the new regulatory perimeter — including any extra-territorial elements that may bring overseas operations into scope.
• Evaluate readiness to seek FCA authorisation within the required timelines — ensuring that applications can be submitted during the gateway window and that business operations continue uninterrupted during the transition to the new regime.
• Identify the governance, policy, procedural, and control enhancements that will be required to be implemented to ensure compliance with the new framework — including updates to surveillance systems, market abuse controls, and operational risk frameworks.
• Review external communications and disclosures, including marketing materials and public documentation — to confirm that they remain accurate, compliant, and appropriately aligned with the enhanced regulatory expectations.
• Assess capital, liquidity, governance, and recovery and wind-down arrangements —  to ensure they meet the new prudential requirements and support long-term operational resilience.
• Ensure senior management are fully engaged and informed — with clear accountability for implementation planning, regulatory engagement, and oversight of the firm’s transition to the new regime.

Originally published by Finextra.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.